GRASSROOTS/Hank Kalet

Energy Policy in Crisis

Never let it be said that President George W. Bush doesn't know an
opening when he sees one.

On Aug. 19, just days after the Northeast emerged from darkness,
the president announced that he planned to push ahead with an energy
bill that he says will prevent future blackouts like the one that
shut down parts of eight states and two Canadian provinces.

At a press conference at his Texas ranch, the president said he
expected the legislation to include "mandatory standards on
reliability, including penalties if electricity suppliers failed to
reliably provide power," the New York Times reported.

"What that means is, that companies transmitting energy will have
to have strong reliability measures in place, otherwise there will be
a consequence for them," he said. "There will be incentives in the
new bill to encourage investment in energy infrastructure."

Taken at face value, the president's remarks might seem like good
news. After all, a chief cause of the Aug. 14 blackout was the
antiquated power grid that carries the juice generated by America's
utility companies.

The problem is that the president and his supporters are less
concerned about the power grid than they are about helping the energy
industry.

The legislation being pushed in Congress goes well beyond
updating the energy grid. It calls for oil drilling in the Arctic
National Wildlife Refuge in Alaska, tax breaks for the oil and gas
industry and other benefits for energy producers.

Democrats want to strip the power grid upgrade from the energy
bill and act on it independently of the other proposals, but
Republicans are not biting. They want comprehensive reform, they say,
not piece-meal legislation -- and that means pleasing their
constituents, the folks who pay for the campaigns.

While the president fiddles, however, the nation's electricity
grid continues to burn, falling into further disrepair, a product of
industry neglect and greed in which the energy companies chase the
profits created by generation of power but ignore the transmission
systems that bring the juice to our homes and offices.

Basically, the blackout is a symptom of a larger crisis in the
industry, one fueled by what Paul Krugman of the Times calls
"faith-based deregulation." Krugman tells the story this way: Once
upon a time, the power industry was treated as a state-endorsed and
regulated monopoly. Each region was supplied with power by one
company that "took responsibility for the whole system --
transmission and distribution as well as generation" for that
region.

"It was and is impractical to have companies competing either to
wire up homes and businesses, or to build long-distance transmission
lines," he writes. "Because effective competition was impossible,
power companies were given local monopolies, and regulated to keep
them from exploiting customers."

That approach remained in place for nearly a century and helped
wire and power the nation as it grew.

As the 20th Century drew to a close, however, the free-marketers
decided it was time for a change. Competition in the energy industry
would be good for everyone. It would drive prices down and lead to
better and expanded service.

So the deregulation movement was born and the utility companies
-- most of them, at least -- had to sell their power plants and
find ways to provide cheaper power.

The experiment has been a failure, and the people of California
and the Northeast -- so far -- have been forced to pay.
Californians, as everyone knows by now, have been the victims of
rolling blackouts and rate hikes caused in part by Enron's jobbing of
the market. Rates are rising in New York and elsewhere. Here in New
Jersey, consumers who were spared rate hikes by state-imposed rate
caps when the state's energy industry began its transition to open
markets are bracing for what could be large spikes in our bills now
that those caps have been removed. And we're still waiting for the
market to offer new companies and better prices.

This should have come as no surprise to the legislators who
created this monster, as Robert Kuttner, co-editor of the American
Prospect, pointed out in a New York Times op-ed after the
blackout.

"In principle, deregulation of the power industry was supposed to
use the discipline of free markets to generate just the right amount
of electricity at the right price. But electric power, it turns out,
is not like ordinary commodities." It can't be warehoused in large
quantities like other products, he wrote. It needs excess generating
and transmission capacity for times when it is in great demand. And
it "requires a great deal of planning and coordination, and it needs
incentives for somebody to maintain and upgrade transmission
lines."

Deregulation, however, created incentives to generate too much
power while ignoring the grid and the planning necessary to keep
everything functioning.

So, what should have been a small-scale blackout spread across
the country, closing businesses and stranding commuters -- and
giving President Bush the political opening he's been looking for to
get his energy bill back on the table.

It is important that the Bush plan be stopped and that Congress
begin to reign in deregulation and take control of not just the power
grid and transmission lines, but generation and all aspects of the
industry. There are too many lives and too many businesses that
depend on electricity to leave its provision to the market.